Vardhman Special Steels Ltd Directors Report.

Dear Members,

The Directors of your Company have pleasure in presenting their 10th Annual Report of the business and operations of the Company along with the Audited Financial Statements for the year ended 31st March, 2020.

1. FINANCIAL RESULTS:

The financial performance of your Company for the year ended 31st March, 2020 is as under:-

(Rs. in lakhs)

Particulars 2019-20 2018-19
Revenue from operations (Net) 84,620.03 1,12,075.94
Other Income 939.82 187.37
Profit before Depreciation, Interest & Tax (PBDIT) 4,912.05 6,971.61
Interest and Financial expenses 2,571.61 2,365.92
Profit before Depreciation and Tax (PBDT) 2,340.44 4,605.69
Depreciation 2,572.08 2,391.77
Profit/(Loss) before Tax (PBT) (231.64) 2,213.92
Provision for Tax - Current Tax 6.45 510.68
- Tax adjustment relating to prior years - (76.88)
- Deferred Tax (572.08) (440.48)
Profit after tax (PAT) 333.99 2,220.60
Other Comprehensive Income/(Expense) (84.12) (18.59)
Total Comprehensive Income 249.87 2,202.01
Earnings per share (C)
- Basic 0.89 6.22
- Diluted 0.89 6.19

2. FINANCIAL ANALYSIS AND REVIEW OF OPERATIONS:

PRODUCTION & SALES REVIEW:

During the year under review, the production of Billet decreased from 1,88,499 MT to 1,18,591 MT, showing a decrease of 37.09% over the previous year. The Rolled production decreased from 1,59,583 MT to 1,31,576 MT, showing a decrease of 17.55% over the previous year.

Your Company has registered Revenue from Operations of RS. 84,620.03 lakhs as compared to RS. 1,12,075.94 lakhs in the previous year. The exports of the Company decreased from RS. 5,822.94 lakhs to RS. 2,498.90 lakhs showing a decrease of 57.09%.

PROFITABILITY:

The Company earned profit before depreciation, interest and tax of RS. 4,912.05 lakhs as against RS. 6,971.61 lakhs in the previous year. After providing for depreciation of RS. 2,572.08 lakhs (Previous Year RS. 2,391.77 lakhs), interest of RS. 2,571.61 lakhs (Previous Year RS. 2,365.92 lakhs), the total comprehensive income worked out to RS. 249.87 lakhs as compared to RS. 2,202.01 lakhs in the previous year.

RESOURCES UTILISATION:

a) Fixed Assets:

The net block as at 31st March, 2020 was RS. 30,856.54 lakhs as compared to RS. 27,982.86 lakhs in the previous year.

b) Current Assets:

The current assets as on 31st March, 2020 were RS. 36,086.79 lakhs as against RS. 54,582.23 lakhs in the previous year. Inventory level was at RS. 15,177.78 lakhs as compared to the previous year level of RS. 31,322.20 lakhs.

FINANCIAL CONDITIONS & LIQUIDITY:

The Company enjoys a rating of "AA/Negative" from Credit Rating Information Services of India (CRISIL) for long term borrowings and "A1+" for short term borrowings, respectively. Management believes that the Companys liquidity and capital resources should be sufficient to meet its expected working capital needs and other anticipated cash requirements. The position of liquidity and capital resources of the Company is given below:-

(Rs. in lakhs)

PARTICULARS 2019-20 2018-19
Cash and Cash equivalents:
Beginning of the year 28.43 748.50
End of the year 230.31 28.43
Net cash provided (used) by:
Operating Activities 13,542.86 (1,884.68)
Investing Activities (8,816.50) (7,012.21)
Financing Activities (4,524.48) 8,176.82

3. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

Management Discussion and Analysis Report for the year under review, as stipulated under Regulation 34(2) (e) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is presented in a separate section forming part of this Annual Report.

4. DIVIDEND:

The Board of Directors of your Company has not recommended any dividend for the financial year 2019-20.

5. CONSOLIDATED FINANCIAL STATEMENT:

As your Company does not have any subsidiary, associate or joint venture company, the provisions of Companies Act, 2013 and Indian Accounting Standards (Ind AS) 110, 111 and 112 in relation to consolidation of accounts do not apply.

6. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES:

The Company does not have any subsidiary, associate or joint venture company.

7. DIRECTORS:

Liable to retire by rotation: In accordance with the provisions of the Articles of Association of the Company, Mr. B. K. Choudhary, Director of the Company, retires by rotation at the conclusion of the forthcoming Annual General Meeting and being eligible, offers himself for reappointment. The Board recommended his appointment for the consideration of the Members of the Company at the ensuing Annual General Meeting.

Appointments during the year: Mr. Raghav Chandra was appointed as an Independent Director of the Company w.e.f.

4th May, 2019 and Mr. Takashi Ishigami was appointed as a Non-Executive Director of the Company w.e.f. 4th November, 2019.

Declaration by Independent Directors:

The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules thereof.

Your Board confirms that in its opinion the Independent Directors possess the requisite integrity, experience, expertise, proficiency and qualifications. All the Independent Directors on the Board of the Company are registered with the Indian Institute of Corporate Affairs, Manesar, Gurgaon (IICA) as notified by the Central Government under Section 150(1) of the Companies Act, 2013 and shall undergo online proficiency self-assessment test, if applicable, within the time prescribed by the IICA.

Companys Policy relating to Directors appointment, payment of remuneration and discharge of their duties:

The Nomination & Remuneration Committee of the Company has formulated a ‘Nomination & Remuneration Policy on Directors appointment and remuneration including the criteria for determining qualifications, positive attributes, independence of a director and other matters as provided under Section 178(3) of the Companies Act, 2013.

The Nomination & Remuneration Policy is annexed hereto and forms part of this report as Annexure I.

Familiarization programmes for Board Members:

Your Company has formulated Familiarization Programme for all the Board members in accordance with Regulation 25 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Schedule IV of the Companies Act, 2013 which provides that the Company shall familiarize the Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of Industry in which the Company operates, business model of the Company, etc. through various programs.

The Familiarization Programme for Board members may be accessed on the Companys website at the link: https://www.vardhmansteel.com/vss/uploads/tpl-buddy-011/img/familarisation%20program.pdf

Annual Evaluation of the Board Performance:

The meeting of Independent Directors of the Company for the financial year 2019-20 was held on 7th February, 2020 to evaluate the performance of Non-Independent Directors, Chairperson of the Company and the Board as a whole.

The evaluation was done by way of discussions on the performance of the Non-Independent Directors, Chairperson and Board as a whole.

A policy on the performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of non-executive directors and executive directors has been formulated by the Company.

8. KEY MANAGERIAL PERSONNEL (KMP):

In compliance with the provisions of Section 203 of the Companies Act, 2013, following are the KMPs of the Company as on 31st March, 2020:

S.No. Name Designation
1. Sachit Jain Vice-Chairman & Managing Director
2. Sanjeev Singla Chief Financial Officer
3. Sonam Taneja Company Secretary

9. NUMBER OF BOARD MEETINGS:

During the year under review, the Board met Five (5) times and the intervening gap between any two meetings was within the period prescribed under Companies Act, 2013. The details of Board Meetings are set out in Corporate Governance Report which forms part of this Annual Report.

10. AUDITORS AND AUDITORS REPORT:

Statutory Auditors:

At the Annual General Meeting held on 27th September, 2018, M/s. BSR & Co. LLP, Chartered Accountants, were appointed as Statutory Auditors of the Company to hold office till the conclusion of 13th Annual General Meeting of the Company.

The Statutory Auditors of the Company have submitted Auditors Report on the accounts of the Company for the accounting year ended 31st March, 2020.

The Auditors Report is self-explanatory and requires no comments. -

Secretarial Auditor:

M/s. Harsh Goyal & Associates, Company Secretary in Practice, were appointed as Secretarial Auditors of the Company by the Board of Directors of the Company in its meeting held on 4th May, 2019 for the financial year 2019-20.

The Secretarial Auditors of the Company have submitted their Report in Form No. MR-3 as required under Section 204, of the Companies Act, 2013 for the financial year ended 31st March, 2020. The Auditors Report is self-explanatory and requires no comments. The Report forms part of this report as Annexure II.

Cost Auditor:

The Company is maintaining the Cost Records, as specified by the Central Government under section 148(1) of Companies Act, 2013.

The Board of Directors has appointed M/s Ramanath Iyer

& Company, Cost Accountants, New Delhi, as the Cost Auditors of the Company to conduct Cost Audit of the Accounts for the financial year ended 2020-21. However, as per provisions of Section 148 of the Companies Act, 2013, read with Companies (Cost Records and Audit) Rules, 2014, the remuneration to be paid to the Cost Auditors is subject to rati_cation by Members at the Annual General Meeting. Accordingly, the remuneration to be paid to M/s Ramanath Iyer & Company, Cost Accountants, New Delhi, for financial year 2020-21 is placed for rati_cation by the Members.

11. AUDIT COMMITTEE & VIGIL MECHANISM:

Composition of Audit Committee:

The Audit Committee consists of Mr. Rakesh Jain, Independent Director, Mr. Sanjeev Pahwa, Independent Director, Mr. Sanjoy Bhattacharyya, Independent Director and Mr. Rajinder Kumar Jain, Non-Executive Director. Mr. Rakesh Jain is the Chairman of the Committee and Ms. Sonam Taneja is the Secretary of the Committee. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism:

Pursuant to the provisions of Section 177(9) of the Companies Act, 2013, the Company has established a "Vigil Mechanism" incorporating whistle blower policy in terms of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for employees and Directors of the Company, for expressing the genuine concerns of unethical behavior, actual or suspected fraud or violation of the codes of conduct by way of direct access to the Chairman/ Chairman of the Audit Committee.

The Company has also provided adequate safeguards against victimization of employees and Directors who express their concerns.

The Policy on Vigil Mechanism and Whistle Blower Policy as approved by the Board may be accessed on the Companys website at the link: https://www.vardhmansteel.com/vss/uploads/tpl-buddy-011/img/Vigil%20Mechanism%20final.pdf

12. CORPORATE GOVERNANCE:

The Company has in place a system of Corporate Governance. Corporate Governance is about maximizing shareholder value legally, ethically and sustainably. A separate report on Corporate Governance forming part of the Annual Report of the Company is annexed hereto. A certificate from the Practising Company Secretary regarding compliance of conditions of Corporate Governance as stipulated under Corporate Governance Clauses of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the report on Corporate Governance.

13. CORPORATE SOCIAL RESPONSIBILITY (CSR):

Vision & Core areas of CSR: Your Company is committed to and fully aware of its Corporate Social Responsibility (CSR), the guidelines in respect of which were more clearly laid down in the Companies Act, 2013. The Companys vision on CSR is to pursue a corporate strategy that enables shareholder value enhancement and societal value creation in a mutually reinforcing and synergistic manner.

CSR Policy: The Corporate Social Responsibility Policy of the Company indicating the activities to be undertaken by the Company, as approved by the Board, may be accessed on the Companys website at the link: https://www.vardhmansteel.com/vss/uploads/tpl-buddy-011/img/Corporate%20Social%20Responsibility%20 Policy.pdf

During the year, the Company has spent RS. 50.68 lakhs on CSR activities.

The disclosures related to CSR activities pursuant to Section 134(3) of the Companies Act, 2013 read with Rule 9 of Companies (Accounts) Rules, 2014 and Companies (Corporate Social Responsibility) Rules, 2014 is annexed hereto and forms part of this report as Annexure III.

14. RISK MANAGEMENT:

The Risk Management Policy required to be formulated under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been duly formulated and approved by the Board of Directors of the Company. The aim of Risk Management Policy is to maximize opportunities in all activities and to minimize adversity. The policy includes identifying types of risks and its assessment, risk handling, monitoring and reporting, which in the opinion of the Board may threaten the existence of the Company.

The Risk Management Policy may be accessed on the Companys website at the link: https://www.vardhmansteel.com/vss/uploads/tpl-buddy-011/img/RISK_MANAGEMENT_POLICY%20final.pdf

15. BUSINESS RESPONSIBILITY REPORT (BRR):

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandate the inclusion of the BRR as part of the Annual Report for top 1000 listed entities based on market capitalization. In compliance with the Listing Regulations, we have integrated BRR disclosure into our Annual Report.

16. INTERNAL FINANCIAL CONTROLS:

The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation was observed.

A report on the Internal Financial Controls under clause (i) of sub-section 3 of section 143 of the Companies Act, 2013, as given by the Statutory Auditors of the Company, forms part of the Independent Auditors Report as Annexure B.

17. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES:

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arms length basis. During the year, the Company had not entered into any contract/ arrangement/ transaction with related parties which could be considered material in accordance with the Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Accordingly, the disclosure of Related Party Transactions as required under

Section 134(3)(h) of the Companies Act, 2013 in Form AOC-2 is not applicable .

The Policy on dealing with related party transactions as approved by the Board may be accessed on the Companys website at the link: https://www.vardhmansteel.com/vss/uploads/tpl-buddy-011/img/RELATED_PARTY_TRANSACTION%20Final. pdf

Your Directors draw attention of the Members to Note 43 to the financial statement which sets out related party disclosures.

18. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

Particulars of loans given/ taken, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the financial statement (Please refer to Note 6, 12 and 20 to the financial statement).

19. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

Energy conservation continues to be an area of major emphasis in our Company. E_orts are made to optimize the energy cost while carrying out the manufacturing operations. Particulars with respect to conservation of energy and other areas as per Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, are annexed hereto and forms part of this report as Annexure IV.

20. ANNUAL RETURN:

Pursuant to the provisions of Section 134(3)(a) of Companies Act, 2013, the web address of the extract of Annual Return of the Company is https://www.vardhmansteel.com/vss/ uploads/tpl-buddy-011/img/MGT-9_2019-20.pdf

21. HUMANRESOURCES/INDUSTRIALRELATIONS:

Human resource is considered as the most valuable of all resources available to the Company. The Company continues to lay emphasis on building and sustaining an excellent organization climate based on human performance. The Management has been continuously endeavoring to build high performance culture on one hand and amiable work environment on the other hand. During the year, the Company employed around 953 employees on permanent rolls.

Pursuit of proactive policies for industrial relations has resulted in a peaceful and harmonious situation on the shop floor of the plant.

22. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES:

The disclosures in respect of managerial remuneration as required under section 197(12) read with Rule 5(1) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is annexed hereto and forms part of this report.

A statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in Rule 5(2) and 5(3) Companies (Appointment

& Remuneration of Managerial Personnel) Rules, 2014 is annexed hereto and forms part of this report.

All the above details are provided in Annexure V.

In terms of section 197(14) of the Companies Act, 2013, the Company does not have any Holding or Subsidiary Company.

23. MATERIAL CHANGES AND COMMITMENT, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THESE FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT:

No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which these financial statements relate and the date of this report.

24. DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to the provisions of Section 134(5) of the Companies Act, 2013, the Board hereby submit its Responsibility Statement:—a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with the proper explanation relating to material departures; b. appropriate accounting policies have been selected and applied consistently and have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2020 and of the profit of the Company for the year ended on 31st March, 2020; c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d. the annual accounts have been prepared on a going concern basis; e. the Internal financial controls have been laid down to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and f. Proper systems have been devised to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

25. GENERAL DISCLOSURES:

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: a. Details relating to deposits covered under Chapter V of the Act. b. Issue of equity shares with differential rights as to dividend, voting or otherwise. c. Significant or material orders passed by the Regulators or Courts or Tribunals which impact the going concern status and Companys operations in future. d. Change in nature of Business of Company. e. Transfer of Unclaimed dividend to Investor Education and Protection fund. f. No fraud has been reported by the Auditors to the Audit Committee or the Board. g. There is no Corporate Insolvency Resolution Process initiated under the Insolvency and Bankruptcy Code, 2016.

Further, your Directors state that the Company has complied with the provisions relating to constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and there was no complaint filed under the said Act.

26. VARDHMAN SPECIAL STEELS LIMITED EMPLOYEE STOCK OPTION PLAN, 2016:

The Company has granted options to its employees under Vardhman Special Steels Limited Employee Stock Options Plan, 2016 (hereinafter referred as ESOP Plan). As per the terms of the plan, the Company can grant a maximum of 3,71,108 options to eligible employees from time to time. One option entitles the holder to apply for one equity share of the Company in terms of ESOP Plan. Accordingly, during the financial year, a total of 6,250 options were exercised by the eligible employees. The paid-up equity share capital of the Company after this allotment stood increased to RS. 35,76,48,730.

The ESOP Plan of the Company is being implemented in accordance with SEBI (Share Based Employee Benefits) Regulations, 2014 and the resolution passed by the shareholders approving the said plan. A certificate received from the Auditors of the Company in this regard would be available during the Annual General Meeting for the inspection by the Members.

The details as required to be disclosed are put on the Companys website and may be accessed at https://www. vardhmansteel.com/vss/uploads/tpl-buddy-011/img/ ESOP%20Disclosure%20-%202019-20.pdf

27. PREFERENTIAL ALLOTMENT:

The Members of the Company in their Extra-Ordinary General Meeting held on 24th October, 2019 had given their approval for issuance of equity shares to Aichi Steel Corporation (ASC) by way of a preferential allotment on private placement basis.

Accordingly, the Board of Directors in its meeting held on 4th November, 2019 had issued and allotted 46,29,629 equity shares @ RS. 108/- per equity share to ASC. The paid-up capital of the Company after the preferential allotment stood increased from RS. 35,76,48,730 to RS. 40,39,45,020. The funds raised from the allotment have not been utilised till date.

. 28. ACKNOWLEDGEMENT:

Your Directors are pleased to place on record their sincere gratitude to the Government, Financial Institutions, Bankers, Business Constituents and Shareholders for their continued and valuable co-operation and support to the Company and look forward to their continued support and co-operation in future too.

They also take this opportunity to express their deep appreciation for the devoted and sincere services rendered by the employees at all levels of the operations of the Company during the year.

FOR AND ON BEHALF OF THE BOARD
Place : Ludhiana (RAJEEV GUPTA)
Dated : 15th June, 2020 Chairman